A key Wall Street analyst slashed his target price for General Motors shares to zero Monday, saying the company could run short of cash by December and that even with government aid, shareholders are likely to lose their investments.

Share story

A key Wall Street analyst slashed his target price for General Motors shares to zero Monday, saying the company could run short of cash by December and that even with government aid, shareholders are likely to lose their investments.

“Even if GM is able to secure immediate U.S. government support, we believe that GM’s predicament has the potential to set in motion a sequence of events that would be bankruptcylike,” said Deutsche Bank analyst Rod Lache, who lowered his rating on GM shares to “sell” from “hold.”

Lache said GM’s U.S. cash could fall to $5 billion by December, which would not be enough to pay the supplier bills for U.S. operations that come due in January. He said that government aid would likely crowd out unsecured investors such as shareholders.

GM spokeswoman Renee Rashid-Merem declined to comment on Lache’s note but said GM is focused on cost-cutting initiatives it outlined Friday when it reported third-quarter earnings.

GM shares plunged nearly 23 percent in Monday trading closing at $3.36, down $1.

GM executives said Friday that securing government aid was their top priority.

The automaker, its Detroit competitors and the United Auto Workers union have asked Congress to help provide a $25 billion loan to automakers and a $25 billion loan to the UAW’s trust fund for retiree health care.

Congressional Democrats called on the Bush administration over the weekend to use a portion of the $700 billion financial-industry bailout administered by the Treasury Department to aid automakers.

President-elect Barack Obama also has vowed to help the industry and he discussed its plight Monday with President Bush during his first visit to the White House since last Tuesday’s election.

The administration has said the only tool it has to help the industry is the $25 billion in loans for fuel-efficient vehicles, which will be dispersed over several months.

No response yet

The Treasury Department hasn’t officially responded to the letter from House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, but White House spokeswoman Dana Perino said Monday the administration did not see how automakers could fit under the program.

Saving financial markets “is what Congress had in mind when it passed that rescue package,” Perino said. “There was not discussion of specific help to auto companies during that debate, and so Congress’ intent was to help financial institutions.”

Two other respected Wall Street analysts predicted GM could survive until the first quarter of next year, but expressed concern Monday about the impact that government assistance would have on the value of GM’s stock.

“Of the four broad options for government assistance for GM, we believe that political pressure to protect taxpayers may lead to a solution similar to the 1979 Chrysler bailout, which was accompanied by concessions from debt holders, labor, suppliers and management,” said Barclays Capital equity analyst Brian Johnson in a research note.

“In any scenario, we see little value for current equity,” he wrote.

Credit Suisse equity analyst Christopher Ceraso advised investors there is no reason to own GM stock until global vehicles sales increase, which may not occur until late next year.

“The bottom line is that at least for the next several quarters, we don’t expect the company to shrink its costs fast enough to stem the cash burn,” Ceraso said. “Neither does GM — hence the plea for government money.”

More layoffs

In a filing with the U.S. Securities and Exchange Commission on Monday, GM said it plans to lay off 1,900 more factory workers at parts-stamping, engine and transmission factories in North America as it cuts expenses.

The 1,900 layoffs will come in the first quarter of next year.

Spokesman Tony Sapienza said the cuts are in addition to 3,600 factory layoffs announced Friday, bringing the total announced in the past week to 5,500.

Sapienza would not say which plants would be affected by the new round of layoffs. GM has 26 powertrain and 22 stamping plants in North America.

Material from The Associated Press and The Washington Post was used in this report.